QANTAS rocked the Australian travel sector’s world last month with the shock announcement that it was cutting travel agent IATA BSP base commission from 5% to 1% on international flights. While the carrier had been increasingly vocal about needing to reduce its distribution costs in recent years, the move still came as a significant blow to the industry which was already reeling from 15 months of COVID-19 disruption, the end of JobKeeper and the Federal Budget forecasts of at least another 12 months before international borders open.
It’s understood that the move will save the carrier some tens of millions of dollars a year, with the clampdown part of a wider COVID recovery plan aiming to reduce annual expenditure by $1 billion. The carrier pointed out it was the first time it had adjusted commission on international fares in more than 15 years, and has given the industry more than 12 month’s notice, with the changes to become effective from 1 July 2022.
With Qantas currently having its entire international fleet grounded the initial financial impact for travel agents in Australia is minimal, but the airline’s move has incensed AFTA which said it had “made strong representations to Qantas on the pressing need to maintain the status quo given travel agents’ primary revenue reliance on international travel and the reality that international travel is unlikely to normalise before mid-2022 at the earliest”.
The AFTA Board said it was grateful for the year-long notice period for the changes, but added “the reality is that the ongoing paralysis of international travel to and from Australia has hit travel agents and businesses extremely hard, and this is another unwelcome blow”.
QF noted that there were already several fare types sold by agents which are not eligible for commission, including domestic and trans-Tasman tickets, corporate fares and group bookings.
“Qantas’ changes to international commission are in line with global trends,” the carrier added, promising to work with the agency community to develop ways to evolve business models and grow again.
“This includes collaborating with the Government and industry as travel bubbles emerge, and working on digital health passes, all of which will benefit the industry in accelerating sales when international travel resumes.”
Igor Kwiatkowski, Qantas Executive Manager, Global Sales & Distribution, said it was expected the change would likely accelerate the growing industry trend towards a “fee for service” model which compensates travel agents for the added value and bespoke service they provide customers beyond the logistics of booking, particularly for managing complex itineraries.